Which of the following argues that the value of levered firm is higher than that of the unlevered firm?

Net Income Approach

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Net Operating Income Approach

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MM Model with Taxes

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Both A and C

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Solution

The correct option is C MM Model with Taxes
Value of levered firm will be higher than the value of unlevered firm under MM approach because the tax shield benefit is increasing up the value of the firm.

Suggest Corrections

List-I	List-II
(a) Modigliani-Miller approach	$1.$ Commercial paper
(b) Net Operating income approach	$2.$ Working capital
(c) Short-term money market instrument	$3.$ Capital structure
(d) Factoring	$4.$ Arbitrage